Daniel J. Sargent North/South: The United States Responds to the New International Economic Order Endings, not beginnings, preoccupied the makers of American policy in the era of the New International Economic Order (NIEO). The collapse of the international monetary system; the expiration of cheap oil, which had fueled the postwar resurgence of industrialized societies; the disgrace of Richard Milhous Nixon; the crisis of American world leadership, even of the Cold War international order: these were among the transitions that American leaders were struggling to navigate when Pres- ident Houari Boumediene of Algeria took the floor at the United Nations in April 1974 to demand the creation of a New International Economic Order that would redistribute wealth from the industrialized societies of the global north—‘‘the powers of domination and exploitation’’—to the countries of the global south. The United States did not choose the confrontation, but as the industrialized world’s wealthiest and most powerful country and the superintendent of the world’s economic and political orders, it fell to the United States to respond.1 Understanding Washington’s response to the NIEO’s challenge requires situating that challenge amid a general crisis of postwar institutional arrangements. This crisis divided the West, defined here as the alliance of capitalist countries that the United States had rallied for Cold War purposes, and encouraged the global south to devise and promote alternative conceptions of international order. The poor countries that caucused as the Group of 77 (G-77) and championed the NIEO invoked the colonial era to explain their own poverty and justify remedial action, but they looked forward, not backward, entertaining a clear concept of the new order they hoped to build. Focused on the sustenance of a faltering status quo, American leaders faced the future with no such clarity. Instead, leaders in the United States and elsewhere competed with the NIEO’s proponents and with one another to respond to the Third World’s challenge. Some favored prudent appeasement; others envisaged counteroffensives. Some hoped that postwar arrangements might yet be sustained; others contemplated remaking postwar institutions and arrangements on their own terms. The global south’s demand for the NIEO did not achieve its intended purpose, but it exacerbated the general crisis of the postwar order and prompted reconsideration, in the north, of alternatives to the status quo. Still, what resulted from this phase of creative turmoil, which spanned from the mid- to late 1970s, was not a remaking of international order on terms more amenable to the world’s poorest people. On the contrary, the market- oriented solutions that emerged from the crisis of postwar arrangements in the 1970s would prove to be even less conducive to broad-based economic development than the old order had been. 201 ................. 18697$ CH14 02-20-15 14:24:06 PS PAGE 201 Focusing on the United States, this essay charts the evolution of official responses to the NIEO’s challenge in the mid-1970s. It begins by situating the NIEO’s challenge within a general crisis of postwar arrangements in the 1970s. The central part of the essay follows the evolution of U.S.-led responses to the NIEO from the spring of 1974, when Boumediene issued the G-77’s demands, through to the end of 1976. During this phase, U.S. secretary of state Henry Kissinger pursued a strategy of constructive appeasement—what I call his ‘‘southern strategy.’’ This strategy aligned with the recommendations of globalist think tanks such as the Club of Rome and the Trilateral Commission, but it encountered stubborn obstacles within and beyond the executive branch of the U.S. government. Domestic politics, in particular, constrained constructive engagement. After Kissinger, the essay concludes, accommodation of the kind that Kissinger sought continued to encounter durable obstacles, as the experi- ences of the Carter administration would confirm. The failure of the NIEO, it follows, owed not so much to reflexive hostility among high-ranking U.S. officials as to political and institutional obstacles that made real- ization of the NIEO’s agenda improbable. What the G-77 proposed was, after all, an ambitious concept for achieving economic government, even economic justice, at the planetary scale. In the absence of either a world state or collaborative institutions capable of approximating the authority thereof, mastery of transnational economic relations would be exceedingly difficult to accomplish. What is most mystifying, in retrospect, may not be the failure of the New International Economic Order but the hope that it inspired in its own time. ‘‘Crisis?’’ asked Britain’s prime minister in early 1979. ‘‘What crisis?’’ Lampooned in his own country, where truckers were striking and trash was piling in the streets, James Callaghan’s words still prompt debate. What kind of crisis turned on the 1970s? To invoke the specter of general crisis—a concept that historians have applied to the economic, social, and political tumult of the early seventeenth century—may be to succumb to hyperbolic analogy; the 1970s did not experience famine, war, and pesti- lence on a general scale, even if the horrors that visited Bangladesh, Cambodia, and Vietnam bore comparison to those that afflicted early-modern Europe.2 The turmoil of the 1970s nonetheless revealed general characteristics: the crises of economic and political orders were interlinked, at the international scale and across societies. What the historian Geoffrey Barraclough, an astute follower of contemporary trends, perceived in the mid-1970s was a ‘‘great world crisis.’’ ‘‘What we are faced with,’’ Barraclough wrote, ‘‘is the breakdown of the industrial system built up in the West since 1950 and of the international order it created.’’3 For Barraclough, it was the interconnectedness of problems, ‘‘the crisscrossing web of unresolved issues in which the world has suddenly become entangled,’’ that made the crisis of the mid-1970s systemic, mandating integrated responses. The breakdown of the world monetary system was symptomatic, and in some ways causative, of the broader crisis in the postwar order. Known as the Bretton Woods, the postwar monetary system was a rules-based order that sustained fixed exchange rates via a gold- dollar exchange standard. The United States fixed its dollar to gold; other countries pegged their currencies to the dollar and retained dollars as reserve assets. Bretton 202 Humanity Spring 2015 ................. 18697$ CH14 02-20-15 14:24:07 PS PAGE 202 Woods institutionalized American hegemony, but the dollar’s singular role conferred costs as well as benefits. Bretton Woods collapsed in 1971–73: its breakdown resulted from the relative decline of U.S. economic power; the disruptive effects of short-term capital movements; and Washington’s efforts to drive down the market value of the dollar. The collapse of Bretton Woods led to no new monetary order; instead, disorder prevailed, made manifest in the general recourse to floating exchange rates. The postwar bid for monetary stability under benign U.S. hegemony had come undone. Even regional monetary stability seemed unworkable, as the members of the European Economic Community (EEC) learned in the mid-1970s. The breakdown of Bretton Woods loosened constraints on monetary creation within capitalist economies, encouraging governments to print currency. Governments did so, hopeful of stimu- lating growth but instead fueling price inflation. Inflation in the most advanced capitalist economies topped 13 percent in 1974; in India, it approached 29 percent; in Chile, it reached more than 500 percent, a velocity that recalled the hyperinflation that had wrecked Europe after 1919.4 The breakdown of Bretton Woods did not cause the oil crisis, but the 19 percent decline in the dollar’s value between 1970 and 1973 clipped the income of the oil- exporting countries, oil being denominated in dollars, and encouraged the exporters to pursue remedial action.5 What enabled them to act was a shift in market conditions that empowered the Organization for Petroleum Exporting Countries (OPEC) and curtailed the capacity of U.S. oil producers to determine market prices. The United States had long dominated world oil production, but U.S. production passed peak output in 1971. With global demand for oil continuing to grow, the industrial coun- tries became, as a consequence, more dependent on the producers of the Middle East. From 1970, these countries pressed for higher prices; by the summer of 1973, the price of a barrel of Dubai Light Crude had increased by 25 percent.6 This reversed a long- term, secular decline in oil prices spanning the 1950s and 1960s, but it was mere prelude to the oil crisis of 1973–74. Meeting in early October 1973, the OPEC coun- tries had already committed to further price hikes when news broke that Egypt and Syria had attacked Israel. Saudi Arabia now orchestrated a series of production cuts and an anti-U.S. oil boycott in the hope of dislodging Washington’s support for Israel. Combined, the price hikes, production cuts, and embargo quadrupled oil prices in a matter of months. By 1974, Dubai Light Crude was selling at $13 per barrel—over six times the nominal price of $1.80 at which it had sold in 1970. For the capitalist societies whose industrial prosperity depended on cheap and abundant oil, this reversal was catastrophic. ‘‘The industrial world will have to realize,’’ the shah of Iran proclaimed, ‘‘that the era of their terrific progress and even more terrific income based on cheap oil is finished.’’7 Straining relations between the United States and its closest allies, the oil crisis threatened, for a time, to overwhelm the U.S.-led international order that emerged from the 1940s. For a quarter century, the other capitalist countries had accepted U.S.